The severe winter of 2000-2001 coupled with the slackness in demand compelled tea manufacturers to put a halt to production from mid-December 2000. Against the backdrop of rising costs of production, multiplicity of taxes and slackness in demand, all is not well with the tea industry, which employs an estimated 11 lakh workers. The Indian Tea Association chairman R S Jhawar spoke to indiamarkets about the trials currently faced by the tea industry.

"We hope the government would take cognisance of the industry's need to double the relief from 20 per cent to 40 per cent under section 33A& B of the Income Tax Act. This would ensure that sufficient funds are spent for uprooting and replanting of tea bushes," points out Jhawar. Excerpts from the interview:

indiamarkets: How were the tea production trends this year? R S Jhawar: The industry witnessed a low demand in the late season in November-December 2000 when the quality of the produce is not very good. After mid-December, manufacturers stopped production due to severe winter conditions especially in the north-eastern region. The total production however, has picked up and is expected to be 825 million kg to 830 million kg. The production had fallen to 805 million kg in 1999 as northern India was in the grip of a severe drought. The highest production was experienced in 1998 when it was 870 million kg. This year, the industry improved orthodox tea production from 70 million kg to 105 million kg.

indiamarkets: How did exports fare in the year 2000? R S Jhawar: The industry laid a lot of emphasis on the export side. Expectations are that the exports will cross 200 million kg up from 194 million kg in 1999.

We improved the production of orthodox tea by 35 million kg. Efforts were made to diversify exports from traditional areas to new regions like West Asia and Western & Northern Africa (WANA) countries. Delegations from ITA went thrice to explore the potential of doing business in these countries. Other non-traditional areas where delegations visited were the United States, France and Canada. We are gradually making an impact in these non-tea drinking countries. In end-January 2001, an industry delegation is leaving for Pakistan. The agenda is to build new and strengthen old tea trade ties between the two neighbours. Pakistan is a good 130 to 140 million kg tea market and it will be beneficial for the Indian tea industry to cater to its tea requirements.

indiamarkets: How has been the consumption pattern of tea in recent times? R S Jhawar: The growth rate of consumption of tea has been negative. It has come down to 1.8 per cent from 3 per cent. Tea may have lost out to other beverages, the producers of which believe in aggressive marketing. The association is looking into this matter. From 2001 onwards, the ITA has proposed that a fund of Rs 6 crore per annum be set up, 50 per cent of which would be borne by the commerce ministry in order to spread public awareness of tea as a health drink especially amongst the youth. We are making marketing efforts to promote tea as a health and lifestyle beverage. We will be putting the message across through PR campaigns such as newspapers, seminar and coordination with the medical community.

indiamarkets: Besides the decline in consumption rates, what are the other ills dogging the industry? R S Jhawar: The industry has a Rs 6,000-crore turnover. Over the past two years, costs have significantly increased. The first is the labour cost, which constitutes 55 to 60 per cent of the industry's overall costs. Fuel costs have hit the roof what with rising petrol prices and other fuels. Cost escalation in foodgrain prices have hit the industry hard because it gives subsidized ration to its workers @55 p per kg. In the last two years, while costs have gone up by 25 per cent, prices of tea have come down by 20 per cent. This has naturally resulted in a 40 to 45 per cent impact on profit margins.

indiamarkets: What is the association's plan of action for the coming financial year 2001-2? R S Jhawar: While the ITA plans to build up a base for better exports and domestic consumption in the coming fiscal, it has prepared a wishlist for the perusal of the commerce ministry.

* The ITA has requested the government to sort out unfair disadvantages to the industry by scrapping the Rs 2 per kg central excise levy. This will cause the government to sacrifice around Rs 90 crore .

* Increase the import duty on tea from the current levels of 35 per cent to as close as possible to the 150 per cent bound rate prescribed under the World Trade Organisation.

* Relief under section 33 A&B of the Income Tax Act to be doubled from 20 to 40 per cent. This would give the industry sufficient funds to uproot old tea bushes and plant fresh saplings. At least 50 per cent of the bushes are old and this hampers production greatly. It takes seven years for a tea bush to produce good quality tea.

* Protect indigenous industry from unfair disadvantages vis a vis other tea producing countries.